The Falklands oil row looks set to flare up again after two London-listed companies struck a $1bn (£646m) deal to exploit energy prospects in the disputed territory.

Premier Oil has announced that it has bought 60% of Rockhopper Exploration's interests in the Falkland Islands, for an upfront payment of $231m. It will pay up to $770m more, if plans to develop the oil prospects are approved.

Tensions over the Falklands have heightened, 30 years after British troops repelled Argentinean invaders from the islands. Argentina's president, Cristina Fernández de Kirchner, chose the anniversary to press her country's claims to the islands they call the Malvinas before a UN committee.

David Cameron responded by saying there would be "absolutely no negotiation". "This is not some game of global Monopoly with nations passing a territory between them," he said in June. "It's about the islanders determining their own future."

Several small exploration firms have been drilling off the coast of the Falklands, with mixed success. The prospect of Premier extracting commercial quantities of oil in the territory will only increase tension. Estimates of the amount of oil around the Falklands range from 8.3bn barrels to 60bn, but Aim-listed Rockhopper is the only business to have come close to realising that promise.

It has found recoverable reserves of between 400m and 500m barrels of oil at its Sea Lion prospect in the north Falklands basin. This deal takes it a step closer to extracting that oil, with Premier stumping up almost all of the development costs. Rockhopper said on Thursday it expects them to come on-stream in the first half of 2017.